The real estate and construction industry is a cornerstone of the global economy, encompassing a wide range of activities from residential and commercial buildings to infrastructure development and property management. At the end of 2023, the US Bureau of Labor Statistics estimates that 8 million Americans worked in the construction industry, while 1.86 million worked in the real estate industry.
Due to the significant impact on employment and the economy, it is essential for investors, advisors and marketers alike to stay abreast of the latest trends in these sectors. Based on the latest insights from Plunkett Research, this article presents the most important trends shaping the real estate and construction industry today.
1. High interest rates Slow home sales
The rise in interest rates was a significant challenge for both the residential and commercial real estate markets. As the Federal Reserve raised interest rates to combat inflation, mortgage rates followed suit, making home buying less affordable. In 2023, the median price of a new construction home rose to $428,600, up from $336,900 three years earlier.
This rise in prices, combined with higher interest rates, has led to a decline in home sales and a slight decline in property prices in some previously booming markets. For investors, this means taking a more cautious approach, focusing on markets where demand is strong despite headwinds.
2. Online competition modernizes the mortgage loan process
The emergence of online mortgage platforms has revolutionized the industry. Companies like LendingTree, Better.com and Quicken Loans offer competitive interest rates and low origination fees, making it easy for consumers to compare options and complete applications online. This increased competition has forced traditional banks to expand their offerings online, resulting in a more consumer-friendly market. For marketers, this shift highlights the importance of having a strong online presence and providing a seamless digital experience to attract and retain customers.
3. The rise in apartment rents is starting to slow down
The rapid rise in apartment rents experienced in recent years has begun to slow down. In 2023, the vacancy rate increased to 6.6% from 5.8% in 2022. This shift is due in part to the completion of 1.2 million new rental units between 2020 and 2023, increasing supply. For investors, this trend suggests a need to be more strategic about property purchases, focusing on locations with sustained demand and long-term appreciation potential.
4. Growth of real estate online services
The use of the Internet for real estate transactions has become ubiquitous, with sites such as Realtor.com, Zillow, and Redfin leading the way. These platforms offer comprehensive tools for home buyers, from real estate listings and virtual tours to mortgage calculators and school district information. For consultants, staying up-to-date with the latest technological developments and integrating them into client strategies can give them a competitive advantage.
5. Green certification and sustainable building practices
Sustainability has become key in both residential and commercial construction. Green building certification programs such as LEED and the National Association of Home Builders Green Specifications are becoming more popular. These programs promote energy efficiency, water conservation and the use of environmentally friendly materials. Investors and marketers should emphasize the long-term cost savings and environmental benefits of green buildings to attract environmentally conscious buyers and tenants.
6. Innovation in building technologies
Technological innovations are transforming the construction industry. Robotics and 3D printing are increasingly being used to increase efficiency and reduce costs. For example, startup ICON uses proprietary 3D printing technology to build homes quickly and cost-effectively. These developments not only improve productivity, but also address the labor shortages plaguing the industry. For investors, these technologies offer an opportunity to invest in forward-thinking companies and projects.
7. The effect of aging baby boomers on planning
The aging Baby Boomer generation has a significant impact on the housing market. As more and more Baby Boomers reach retirement age, the demand for assisted living homes is increasing. Universal design principles that make homes accessible and comfortable for people of all ages and abilities are increasingly popular. For marketers, promoting these services appeals to a large segment of the market that values long-term livability and security.
8. Challenges in the Chinese real estate market
The Chinese real estate market has faced significant challenges in recent years. A construction boom has led to an oversupply in some areas, while property prices have soared in major cities such as Beijing and Shanghai. The market saw a downturn in 2023-2024, with many developers running out of cash and projects remaining unfinished. Investors interested in China should carefully assess market conditions and consider the risks associated with overleveraged developers.
9. The rise of mixed-use developments
Mixed-use developments combining residential, commercial and entertainment spaces are increasingly popular. These developments offer the convenience of living, working and playing in one place, which is particularly attractive in urban areas. Projects such as the Time Warner Center in New York City exemplify the potential of mixed-use developments to increase property values and attract diverse tenants. For consultants, advising clients on the benefits of mixed-use projects can lead to successful and sustainable developments.
10. Challenges and Opportunities in Malls and Malls
The retail sector has been hit hard by the rise of e-commerce, which has led to a drop in foot traffic and store closures. However, successful mall operators are adapting to integrate entertainment, dining and experiential retail into their spaces. Focusing on high-end malls and malls that have embraced these changes may result in better returns for investors. Marketers need to highlight these unique features to attract buyers and tenants.
11. Remodeling market fluctuations
The remodeling market has experienced fluctuations, and the recent slowdown is expected to continue. Factors such as rising construction costs, labor shortages and economic uncertainty have also contributed to this trend. However, there is still high demand for energy-efficient upgrades and renovations that serve multigenerational living. For consultants, identifying high-demand transformation projects and advising clients accordingly can lead to successful results.
12. Coexistence and cooperation agreements
The concept of living together and working together faces challenges, especially during the COVID-19 pandemic. However, there is still room for growth in these areas as flexible living and working arrangements become more popular. Companies like WeWork and Common are adapting their models to changing needs. For investors, these common spaces offer an opportunity to tap into changing lifestyle trends.
13. The Internet of Things (IoT) and the smart home
Smart home technology continues to grow, and devices like Nest thermostats and the Ring doorbell are becoming commonplace. These technologies offer better energy efficiency, safety and comfort. For marketers, emphasizing the benefits of smart home features can attract tech-savvy buyers and increase property values.
14. The future of housing and cities
Urbanization and population growth are driving the demand for innovative housing solutions and infrastructure development. Megaregions, defined as metropolitan areas with significant economic and population growth, will play a decisive role in shaping the future. Sustainable building practices, advanced building technologies and smart city initiatives will be essential to meet the needs of a growing urban population. Staying ahead of these trends and exploring opportunities in emerging mega-regions can lead to significant benefits for investors and advisors.
Stay informed in the changing market
The real estate and construction industry is undergoing significant transformation due to economic, technological and demographic changes. High interest rates, online competition and sustainability are reshaping the market, while advances in construction technologies and the Baby Boomer influence create new opportunities and challenges. By staying aware of these trends and strategizing accordingly, investors, advisors and marketers can navigate the complexities of the industry and achieve long-term success.
Additional real estate and construction industry market research
This article is an excerpt from a recent report Plunkett’s Property and Construction Almanac 2024which includes competitive intelligence, market research and business analysis – everything you need to know about the real estate and construction industry.
With this report, you can quickly understand key industry trends, access key real estate and construction industry statistics, and learn about the top competitors in the field. For more information, visit the report page using the link above.
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